- James Foster and Alex Ralph are avoiding big global companies that might be hurt by a trade war between China and America
- They think we’ll ultimately avoid a no-deal Brexit
- They still like bonds issued by banks and insurance companies and have avoided those issued by more economically sensitive industrial companies
We still think this is a great fund for combining some income from a bond fund with the potential for growth over the long term. The managers have bags of experience and they run the fund in a flexible way.
They move between government bonds, investment-grade bonds, and higher-risk high-yield bonds as conditions change. They’ll have a good mix of investments across a variety of sectors to reduce the risk of one area dominating performance.
They’ve used this approach successfully for many years and we think they’ve got the potential to do well in future too, although there are no guarantees. The fund’s on the Wealth 50 list of our favourite funds and it currently yields 3.8%, though this is variable and not an indication of future income.
The fund hasn’t performed as well as the average fund in the sector over the past year. Much of the damage was done in the final quarter of 2018. The managers have quite a lot invested in bonds issued by financial companies and higher-risk high-yield bonds. These areas didn’t do well at the end of last year.
However, things have improved a little this year, and although it’s only over a very short time period, high-yield and financial bonds have performed better.
Their longer-term track record is superb. Since the fund launched in June 2005 it’s grown by 89%* with income reinvested, compared with 60% for the average fund in the sector. Please remember past performance isn’t a guide to the future.
Artemis Strategic Bond - performance since launch
Past performance is not a guide to the future. Source: *Lipper IM to 31/01/2019
|Annual percentage growth|
| Jan 14 -
| Jan 15 -
| Jan 16 -
| Jan 17 -
| Jan 18 -
|Artemis Strategic Bond||4.7%||-1.4%||10.0%||6.7%||-2.4%|
|IA £ Strategic Bond||7.6%||-2.9%||7.7%||4.6%||-0.7%|
Past performance is not a guide to the future. Source: Lipper IM to 31/01/2019
The managers’ success is partly down to their flexible approach, but also a willingness to have quite a lot invested in higher-risk areas. This has boosted performance, but it also means the fund can be more volatile than others at times. They have the flexibility to use derivatives too, which increases risk.
James Foster and Alex Ralph can still find attractive yields on high-yield and financial bonds, so they’re happy to stay invested. They think some investors underappreciate how well-regulated banks are these days and they don’t think they’re as risky as they were a few years ago. They also think lots of insurance companies are in good financial health, so they’re happy to have some investments here too.
They’re avoiding big, global companies that could be hit by an escalation of the trade war between China and America. They’re also avoiding economically sensitive industrial companies that have taken on a lot of debt in recent years. If economic growth slows these companies are likely to struggle, and this could have a negative impact on their bonds.
Instead, they’ve invested in bonds issued by utilities and telecoms companies. There are areas that tend to be more resilient in an economic downturn because they’re essential services.